Bank Shareholder, Blame Thyself

By

John Carney

March 31, 2014 4:14 p.m. ET

Investors looking for someone to blame for unexpected losses at a bank may want to first glance in the mirror.

A study of 730 U.S. banks found that shareholder power may lead firms to make riskier loans—and retain their risk. This would seem to challenge the conventional wisdom that empowering shareholders should naturally curb risk-taking.